All Forum Posts by: Mike Klarman

No such thing as 3% on a fix n flip loan.  They are short term loans so the interest rate goes up.  With great experience and decent credit you can find 7.99% without the experience rates jump.  There's spots in the low/mid 8s that is usually for your experience of 3.  Then if you are a 1 or 2 for experience you see rates from 10.5% all the way up to 12%.  Interest only payments.  Refi after 3 months, some do 6 months.  Usually if the same bank does the fix n flip they will refi you in 3 months - given the work is done and you have a lease and can prove receipt of first month's and security deposit.

If you are just starting out, even if someone will agree to lend you money, it will only be 80% LTV toward purchase and damn near 12%+ rate. 2 points and some will charge 3 points or 2.5 points on newbies because of the risk factor.

If you want, I can give you the terms of a loan with your experience doing this property and you will see what your rate would be and what the loan payment would be and what your expected ROI would be.

Just email me.

I can tell you that investors cash out all the time to invest somewhere else.  You can get 75% of 200k lets say.  That's 150 - 20k payoff so you come away with 130k or so.  You have to find out what the Debt Service Coverage Ratio would be given the rent you collect in ratio with the loan payment.  Most banks like to see 1.1 : 1 bare minimum but as an investor you'd love to be much higher.

If you wanna figure out what the loan payment would be for you on your exact property I can do it for you so you can compare that number to the monthly rent.

Don’t be afraid of Hard Money. Think about it.  A house costs 200k.  It has a market rent of 1300.  You’d like to get this asset.  You have 20% to put down but need to borrow 80% to close the deal.  Would you pay 3 - 4% fee to a lender for the ability to acquire this asset?  

So in this scenario you’d borrow 160k.  4% of that is 6,400.  Would you pay a 6400 premium to put this asset in your portfolio? I would.  Your note will be 800 and you’ll collect 1300 each month for rent.  In a year you have your fee to do the deal back.

When you do a fix n flip deal with HML- figure to pay 2points plus closing fees 1200 - 1500.

When doing a purchase or cash out you are going to pay the 1200 - 1500 but u will also choose a rate from the chart. Each rate has a price in points next to it. You can spend anywhere from 1 point all the way to 5 points. The lower the rate the higher the price. The investors who paid 5 points 8 months ago to get 3.5% are laughing all the way to the bank. Your DSCR ratio increases dramatically the lower your interest rate goes. Investors who intend to hold long term buy all the way down. Gives them the lowest note payment which provides a maximum in net profit from rent.

You can do a delayed purchase.  Some Hard Money Lenders do them, we do.  So we do a loan like we are underwriting it from the beginning but you already own it. So you'll get a large portion of the purchase price back and rehab funds for items not completed yet.  This will give you the money to finish and then some. 

Hard Money can help here. you just have to check a few boxes.  First it sounds like this may be a "heavy rehab".  What is the as-is value. If it is a heavy rehab you'll need experience to get a fix n flip loan on it.

What kind if real estate exp do you bring?

What is your credit score?

What kind of capital are you working with?

Any HML will want answers to those questions plus a rehab budget before getting you a term sheet for a fix n flip loan for this property.

I close these types of loans all the time, if you have any specific questions about the process don't hesitate to reach out.

For straight purchase, if you have 700+ credit then max leverage will be 80%.

For a fix and flip loan you can get 80%, 85%, or 90%, some do do 100% purchase price but there's lots of fine print with them.  To get 90% you'll need three holdings, or three flips, or a combo of 3.  To get 85% you can have less than 3 but have strong credit.  You'll get 80% if a first time flipper.

Austin, congrats on your new business opportunity.

1) Definitely get either a real estate license or contractor's license, it does add legitimacy and most lenders will count it as a point of experience.  Fix n Flip loans rely heavily on experience - the number of houses held for rent or flipped in the last 3 years.  You get a point for each one (plus you get a point for a license above).  Once you reach 3 for exp then you can get 90% toward your purchase and 100% of your rehab money.

2) Just starting out as you and your partner are, you can't bring the experience to the table but can you bring. good credit and capital?  If a new borrower it is important to have a good credit score in the 7s at least and as close to 750 as possible.  Plus, if you can show the bank enough reserves to close your loan plus alot extra it makes them feel lots more comfortable with the loan.  When new borrowers show their reserves spread across multiple accounts and they show just enough to close but nothing more - banks get nervous.

3) Can you do one with a third partner?  Someone with experience who can add value to you as borrowers.  Gain experience riding the coattails of someone who already has some.

If you have any specific questions about the loan process shoot me an email.

Now. Don't wait. And also our UW team likes to see something in the Articles Of Organization about what the LLC is for. I tell people to put: This LLC is for all real estate investment transactions.

Depending on where you file, the paperwork can take a few weeks to get back to you.

Never heard of that.  We release draw funds 24 - 48 hours after the inspection.  They are having issues with their note buyer?  That's vague.  So they are having issues in the secondary market where these loans are sold?  What is the issue?  Who is the servicing company?

You're in a tough spot.

If you are closing cash (not sure you are financing or not), you can do a delayed purchase with a lender and get back 70% - 80%, you can also convert to a fix and flip and ask the lender for the rehab money - once done get the renter and then you can refi into a 30 year under the new appreciated value of 100K+.